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Ford VP: Good Labor Relations Saved Company

Ford’s close call with bankruptcy in the Great Recession was averted partly because of its good labor relations, according to Martin Mulloy, vice president, labor affairs, with Ford Motor Co.

Speaking at a Federal Mediation and Conciliation Service conference at Georgetown Law Center in Washington, D.C., on Dec, 6, 2012, Mulloy said, “If it had not been for our good relations with the UAW [United Auto Workers], Ford would have imploded.”

All wasn’t always sweetness and light between the two. The relationship was strained from the time of the first union contract with Ford in 1941 through 1976, the year when the union last went on strike, said James Settles Jr., vice president of UAW. With the rise of automakers other than the Big Three, the UAW realized it would “have to do things differently,” he noted. “From the ’80s on, the relationship improved” and became more honest.

Ford’s fortunes plummeted in the 2000s, even before the recession hit. From 2001 to 2008, the company lost $50 billion, Mulloy said. That included $17 billion in 2006 alone. “Most thought Ford would go bankrupt,” he recalled.

The company’s CEO, CFO and operations executives sat down with UAW officials and shared the books. “Utter transparency of data” convinced labor that if the company was going to “save the place, we’d save it together.”

Restructuring

The hard work had only just begun. The company and union figured out a way to reduce Ford’s employees from 100,000 to 45,000 through retirements and voluntary buyouts, instead of involuntary reduction, Mulloy noted.

Before reducing its workforce, Ford had seven brands. UAW officials questioned why so many brands were necessary. Company executives agreed that there was “too much complexity” and simplified its structure.

Things didn’t improve overnight. Ford’s stock dropped as low as a dollar a share, reducing it to junk status.

In addition to the workforce reduction, Ford negotiated a huge concession in pay—a two-tiered system where new hires would receive lower pay.

Despite much opposition, the UAW “knew it had to happen,” Settles said. “If not, the company could not compete.”

The days of automatic yearly raises on top of raises were over, too.

Shared Fortunes

When times are good, as they are this year for the company with the stock back at investment grade, everyone shares in the wealth. This year, Settles expects raises, tied to the company’s performance, to be 10 to 15 percent based on the first three quarters.

In last year’s contract negotiations, the union got Ford to commit to spending $16 billion in the United States, and creating 12,000 jobs stateside. “One year into the contract, we’ve almost gotten half those jobs back,” he remarked.

Settles said he was proud to bring work back to America, and noted that the union even negotiated money to help the homeless.

“We prosper during good times. It’s a new way of doing business. So goes the company, so goes us,” Settles remarked, adding, “We’re interested not only in members and the company, but the community.”